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HSBC upgrades view on PHL GDP, sees risk in infra delays

By Melissa Luz T. Lopez,
Senior Reporter

HSBC LTD. said it raised its growth forecast for the Philippines, but warned that a slower-than-expected rollout of big-ticket infrastructure projects could dampen investor sentiment and drag economic prospects.

In its quarterly report, the global lender raised its growth estimates for the Philippines to 6.7% for this year and 2018, higher than the 6.5% annual expansion previously expected. Growth is expected to accelerate to 6.8% by 2019, which will miss the 7-8% target set by the Philippine government.

HSBC’s upgraded forecast mirrors the faster growth estimates announced by the Asian Development Bank and the World Bank last week, as these institutions expect the Philippines to sustain its robust momentum and remain as one of Asia’s growth leaders.

Philippine gross domestic product (GDP) expanded by 6.9% during the third quarter, beating market expectations on the back of accelerated public spending, which offset softer household consumption. This brought the nine-month growth rate to 6.7%, well within the 6.5-7.5% government target for 2017.

HSBC expects the expansion to hold over the next two years with strong private spending and investments on the rise.

“We expect public construction to expand further in 2018 as the government embarks on a more aggressive infrastructure program and boosts infrastructure spending to 7.2% of GDP by 2022,” HSBC economist Noelan Arbis said in the report, referring to the P8.4-trillion government building program.

The infrastructure plan — which hopes to build 75 flagship projects nationwide — has been the source of renewed optimism towards the Philippine economy. On the other hand, lackluster delivery on this promise could mean a disappointing turnout for the economy in the years ahead.

“The key downside risks to our economic outlook are primarily on the domestic front, specifically a failure to approve and break ground on key infrastructure projects and/or the government reverting to its historical pattern of underspending,” HSBC said.

“A realization of those risks could reduce investor and business confidence and drag down growth.”

HSBC has noted an easing trend in fixed investment, which posted slower growth for the fifth straight quarter as of end-September.

It also flagged potential risks to jobs amid a shift in worker demand towards construction and away from agriculture, leading to a recent rise in male unemployment.

“For now, we believe this development is largely transitory in nature, but it poses downside risks to growth if the economy is unable to absorb these workers and/or the government is unable to fully realize its infrastructure plan,” the report added.

Meanwhile, the Philippines is expected to remain “relatively insulated” from external risks despite policy uncertainty in advanced economies and rising global yields, given a low exposure to foreign debt.

Within-target inflation continues to support favorable economic conditions, HSBC’s Mr. Arbis said, although he remains of the view that a cut in the 20% reserve requirement is due by the first quarter of next year.

One rate hike is also expected from the Bangko Sentral ng Pilipinas between April-June in order to “prevent any unanticipated rise in inflation” later that year.

Uniquely CNBLUE

By Cecille Santillan-Visto

Concert Review
2017 CNBLUE Live
[Between Us] in Manila
Dec. 8, 2017, 6 p.m.
Smart Araneta Coliseum

WHEN YOU have watched a Korean rock group perform at least five times, it should be hard for the artists to still pull off a surprise.

Not so with CNBLUE. Vocalist Jung Yong Hwa, lead guitarist Lee Jong Hyun, bassist Lee Jung Shin and drummer Kang Min Hyuk always have an ace up their sleeves — making their performances enjoyable to watch every single time. The Manila leg of their “Between Us” world tour was certainly no exception.

The concert at the Big Dome — their third solo in the Philippines — was the closing tour performance, and as such, was more special for their Filipino fans.

“Ang tagal nating ’di nagkita (It has been a long time since we last met),” said Mr. Kang, drawing ear-piercing shrieks from their supporters. Well, it was not really that long. CNBLUE was just here in March for the 2017 Global Peace Concert — One Korea in Manila, where the boys undoubtedly brought the house down and outperformed the other K-pop groups in the powerhouse lineup. They also had sold-out concerts in Manila in September 2014 and June 2013 for the Can’t Stop and Blue Moon tours, respectively.

For this writer, the sixth time to see them live was still definitely delightful. The way Mr. Jung pumped up the audience, CNBLUE could very well stand for Code Name Bursting with Lethal, Unlimited Energy.

“I am your lodi…Today is daebak, today (is) petmalu (I am your idol. Today is amazing, today is extremely cool)!” said leader Yong Hwa. Throughout the night, he and his mates owned the stage, projecting their tireless aura all the way to the last loyal fan in General Admission.

Between Us was a mix of cuts from CNBLUE’s album 7°CN, the group’s seventh mini-album released worldwide in March, and several songs from their more recent work, Can’t Stop, Blueming and Re:Blue.

FNC Entertainment’s award-winning band opened the concert with “Radio,” from their album Wave, where CNBLUE infused solid rock with electronic dance music. “When I Was Young,” and “Domino” quickly followed for a one-two punch. But the opening hysteria was sustained with “I’m Sorry,” undoubtedly one of the group’s biggest hits.

CNBLUE sang 24 songs in seven sets. They connected very well with the audience, clearly communicating in English, with no need for an interpreter. Their numerous world tours have undoubtedly made them better and more confident performers. Even as the members spend a good portion of their time starring in prime time Korean dramas, they have not lost their rock persona on stage.

If at all, their individual ventures into the small screen have contributed to making them well-rounded musicians, with whom the audience can better relate to.

The stage was extended to allow members to interact with fans during the performance. The spectators at the VIP area had a field day taking videos and photos of the all-too-accommodating CNBLUE members. IME PH did a spectacular job in livening the stage with the lights and LED-screen combination, bringing the whole experience a notch higher in terms of production value.

All songs were delivered with gusto with the set where they dished out “Feeling,” “Coffee Shop,” “Cinderella,” and “Between Us” certainly one of the most applauded portions.

In “You’re so Fine,” “Face to Face,” and “Wake Up,” CNBLUE showed its versatility as it can comfortably shift gears from ballad to soft rock to electronic pop to pure rock in a short span.

In the acoustic set, the boys moved to the extended stage, with drummer Min Hyuk exchanging his full set for a beat box. CNBLUE turned playful, giving the crowd impromptu performances of classics such as Stevie Wonder’s “Isn’t She Lovely” and “Hotel California,” by the Eagles, where Mr. Jung messed up with the lyrics to flatter the fans. In “Manito” from 7°CN, the entire Big Dome joined by singing “Noreul Saranghae” (I Love You), visibly pleasing the band. “Love Light,” one of CNBLUE’s best loved ballads, soon followed.

They closed with “Young Forever,” and when Mr. Jung said: “Maraming salamat po, Pilipinas!” the audience felt that a comeback concert was already in the offing.

There are at least three good reasons CNBLUE is the only Korean rock band that has managed to stay relevant and worth following since they were launched more than eight years ago. They are ultimate entertainers who give it their all in each performance. They compose and produce their catchy and jam-worthy pieces. They continue to explore other fields, without losing or straying too far from their musical roots. And while other K-pop groups will continue to sprout to fight for fans’ attention, CNBLUE will continue to be a cut above the rest. The “U” in CNBLUE stands for unique.

Wednesday Group scores double kill, captures titles in LGR Hoops

WEDNESDAY Group ruled the 38-and-under and novice divisions of the LGR Hoops Season 4 to lead the list of winners in the finals held recently at the Filoil Flying V Arena.

Tonton Silva led the way for Wednesday Group’s balance attack, scoring 18 points and completing three steals while powering his team to an 85-76 novice division triumph over Nougat of this event sponsored by Bugsy’s, Rain or Shine, Petron, Titan, NBA Store, Gatorade, BTV, Gold’s Gym, Zarks Burger, Kartilya, SYF and Ybalai. Wednesday Group made it a twin kill as its 38-and-under squad repulsed Scoria Grill, 86-82, behind Rico Limare’s double-double effort. Limare finished the game with 15 points and 11 rebounds.

But while Wednesday Group had a big day, their twin wins were nearly overshadowed by Los Mexicanos’ thrilling come-from-behind victory over RJS Construction, 88-86, to win the Neophyte division crown. Los Mexicanos unleashed a telling 7-0 run in the final minute to complete a tense win over RJS Construction. MJ Dizon finished with 15 points, including a three-point play in the crucial stage of the match which was all Los Mexicanos needed in pulling off a win.

Los Mexicanos was trailing by five points heading into the final minute until it unloaded seven unanswered points.

CW Home Depot pulled off a contrasting victory in the finals of the corporate division and easily disposed of Shangri-La, 96-65.

Raju Mohammed finished with a double-double of 22 points and 18 rebounds in leading his squad to victory.

Also winning the championship in the novice plus division was Baketech, which upset the highly favored Zarks, 103-94, as JB Joven’s 15-point and 11-rebound output was backed up by a balance scoring support that allowed the team to complete a Cinderella Run. — Rey Joble

Iloilo entrepreneurs urged to practice inclusive business

ILOILO CITY — The level of consciousness on “inclusive business” (IB) practices among local entrepreneurs remains low, according to the Iloilo Business Club (IBC).

Lea E. Lara, IBC executive director, backed the earlier statement of Felicitas Agoncillo-Reyes, Department of Trade and Industry (DTI) assistant secretary for Investments Promotion Group, that Iloilo businesses need to step up efforts in involving microentrepreneurs in the value chain.

“I am sure that they already practice IB principles, but only lack in scale. For you to be an inclusive business, you need to be scalable or a business model that you can replicate,” Ms. Reyes said during the IB road show in Iloilo last month organized by the Board of Investments (BoI).

Ms. Lara said while shopping malls, supermarkets, and food chains are already sourcing products and supplies from local farmers, there is a need to set up a system that will deliberately track and promote such activities.

“They’re practicing, but the level or extent of inclusivity in their operation was not consciously tracked. There was no study about the patronage of local businesses,” the IBC official said.

“That’s one of the things that we’ve been telling the city and province. That as soon as an investor sets up a business, they should be given a directory of local suppliers. Rather than they get their suppliers from Cebu or from other places. So that you could translate the economic benefit by involving the local businesses,” she added.

The IBC, for its part, engages in the promotion of native products.

“We’re partnering with the province and the Department of Agriculture in holding market matching. We try as much as possible that when dealing with investors, we network them to small businessmen,” she said.

A study titled Business+ Philippines — jointly conducted by the BoI, the DTI industry development and investments promotion arm, and the United Nations Development Programme (UNDP) Istanbul International Center for Private Sector in Development — indicated the low levels of awareness and engagement of Philippine companies in IB, but a “growing enthusiasm and interest” at the same time.

The study, released in late November 2017, surveyed 19 business executives and 223 companies.

Ms. Reyes said she met with Iloilo City Mayor Jose S. Espinosa III who expressed enthusiasm on promoting IB.

“There’s a lot of promise for Iloilo City and for the region to become an IB center. We will put principles of IB to be something to be included in the investment code to be approved by the city government,” she said. — Louine Hope Conserva

The shows we binged on in 2017, according to Netflix

THE YEAR is ending and Netflix is here to help you make sense of your binge-watching habits as the streaming service recently unloaded its end-of-year statistics.

Last year, US cloud-based online survey company Survey Monkey coined the term “Netflix Cheating,” where people watch shows ahead of their significant others. The study showed that globally, 43% of the respondents are “cheating” on their partners.

And Netflix Philippines is embracing the moniker as their “Binge-lit, 2017” list included the top 10 shows Filipinos “cheated on” their significant others with (meaning the shows cheaters shamelessly watched ahead of their partners).

On top of the list is Narcos (the series about the cocaine trade in Colombia) followed by the Netflix original, Stranger Things.

Stranger Things, created by the Duffer Brothers, pulls double duty: while it is a show that tempts people to cheat, it is also a show that apparently brings the entire family together.

Stranger Things topped the list of “shows that brought us together in 2017,” followed by 13 Reasons Why, the serial adaptation of Jay Asher’s 2007 novel.

In all, Netflix subscribers around the world collectively watched 140 million hours of shows a day.

From the data collected, Netflix outed a person from the UK as having watched Bee Movie 357 times this year. The Philippines, meanwhile, has a Madagascar fan who has watched the said flick 131 times.

“It’s an impressive feat, especially as the average member watched around 60 movies on Netflix this year,” said a company press release.

Netflix also named April 14 (Good Friday) as the “most popular” day to watch shows based on the average daily viewing hours per member between Nov. 1, 2016 and Nov. 1, 2017.

“Perhaps during that [Holy Week] weekend, a lot of Filipinos even brought their favorite shows wherever they went because, the Philippines is among the top mobile downloaders in Asia,” said the release.

Results are based on more than 60,000 survey responses from Netflix members between Oct. 24-30.

The sample is representative of an adult population who watch TV shows with their family in 32 countries. The survey included new show or new season launches of Netflix originals from Nov. 1, 2016 — Nov. 1, 2017 only.

The Shows We Devoured in 2017
(shows watched more than two hours per day)

1. My Only Love Song
2. Anne with an E
3. Suburra: Blood on Rome
4. The Keepers
5. The OA
6. 13 Reasons Why
7. Marvel’s Iron Fist
8. Cable Girls
9. The Mist
10. Fauda

The Shows We Savored in 2017
(shows watched less than two
hours a day)

1. Midnight Diner: Tokyo Stories
2. Samurai Gourmet
3. Big Mouth
4. Disjointed
5. Neo Yokio
6. The Sound of Your Heart
7. A Series of Unfortunate Events
8. The Crown
9. Friends from College
10. White Gold

The Shows That Got Us
Cheating in 2017

1. Narcos
2. Stranger Things
3. Riverdale
4. 13 Reasons Why
5. Orange is the New Black
6. Marvel’s Iron Fist
7. Sense8
8. Black Mirror
9. Marvel’s The Defenders
10. Star Trek: Discovery

SN Aboitiz Power expects 20% rise in sales, profit this year

By Victor V. Saulon, Sub-Editor

THE SN Aboitiz Power (SNAP) group expects to end the year with an “almost 20%” increase in revenues and profits, a top official said.

“In the fourth quarter last year and into the first quarter this year, there was a lot of inflow so we were able to keep the dams at a very high level,” Joseph S. Yu, SNAP president and chief executive officer, told reporters in a briefing on Monday.

“So that allowed us to then ride into the dry season with a lot of power. We’re actually running on almost normal load.”

The SNAP group, a joint venture of Norway’s SN Power AS and Aboitiz Power Corp., owns a number of hydroelectric power plants in north Luzon.

“For us, 2017 was a very strong year,” Mr. Yu said, but declined to disclose revenue and profit figures.

SN Aboitiz Power-Magat, Inc. owns and operates the 360-MW Magat hydroelectric power plant at the border of Isabela and Ifugao. Its 8.5-MW Maris Main Canal 1 hydroelectric power plant started commercial operation in November.

“Magat has set a record [for the plant] this year in terms of total kilowatt hours (kWh) produced,” Mr. Yu said.

Another unit, SN Aboitiz Power-Benguet, Inc., owns and operates the 105-MW Ambuklao hydroelectric power plant in Bokod and the 140-MW Binga hydro plant in Itogon.

Ambuklao-Binga hydroelectric power complex is a facility won by AboitizPower through its unit SN Aboitiz Power-Benguet when this was bid out by state agency Power Sector Assets and Liabilities Management Corp. in 2007.

The Ambuklao plant re-operated in 2011 as a 105-MW power plant after its rehabilitation and upgrading between 2008 and 2011. The plant had been shut down and put under preservation since 1999 because of the damage from the 1990 earthquake.

The Binga plant also underwent refurbishment, which was started in 2010 and completed in 2013, resulting in an increased generating capacity of up to 140 MW.

“The front half of the year, we had a lot of inflow, we had a very good hydrology so were able to run much, much more in the front half of the year than we would normally be able to,” Mr. Yu said about the plants’ performance.

“The first two quarters of the year we had very strong production,” he added.

He declined to give SN Aboitiz Power group’s contribution to the revenues and income of parent firm AboitizPower except to say it is “very significant.”

SNAP is currently securing permits for the $420-million hydro facility it is developing in Alimit, Ifugao province. The project is a 390-MW complex composed of three facilities — the 120-MW Alimit hydropower plant; the 250-MW Alimit pump-storage plant; and the 20-MW Olilicon hydropower plant.

Fuel prices up this week

OIL COMPANIES will be raising the prices of gasoline, diesel and kerosene this week to reflect the movement of prices in the international oil market. Gasoline will rise by P0.30 per liter (/L), diesel by P0.50/L and kerosene by P0.45/L, the retailers of petroleum products said. “There will be no increases for kerosene in areas under a state of calamity. These reflect movements in the international oil market,” Petron Corp. said in a statement. Most of the companies said the price adjustments will take effect at 6 a.m. on Tuesday, Dec. 19. — Victor V. Saulon

Duremdes sees promising Maharlika Pilipinas Basketball League

SIX teams from the different municipalities in the National Capital Region and one province from Northern Luzon will see action in the Maharlika Pilipinas Basketball League, which will come off the wraps on Jan. 13.

Newly appointed commissioner Kenneth Duremdes is excited to see a promising season after a huge draw in the pre-season event.

“It’s promising because we can see the excitement building up in the different municipalities we visited. Each time their home team play, fans throw their full support,” Mr. Duremdes told BusinessWorld.

Participating in the first season of the tournament created by Senator Manny Pacquiao are the Bulacan Kuyas, Valenzuela Classic, Marikina Athletics, Tanduay Rhum Masters, Caloocan Supremos, Navotas Redcore, and Muntinlupa.

Mr. Duremdes said the team will have a modest goal in the inaugural staging of the tournament by starting in the Luzon leg.

As soon as they wrap up the Luzon leg, Mr. Duremdes said they will push the league with its Visayan leg as several teams from different provinces in the south had already shown their interest.

“This early, my former teammates, Al Solis and Bonel Balingit, are already asking if we can push through with our program in the south. They told me that there has been no tournament in Cebu for a long time,” added Mr. Duremdes.

Cebu has been the hotbed of basketball in the country, producing some of the biggest names the country has produced, the latest was June Mar Fajardo, the reigning four-time Most Valuable Player (MVP) in the PBA and considered to be the best cage player in the country today.

A former league MVP and named as one of the 40 Greatest Players in the PBA, Mr. Duremdes considers his role as commissioner as probably the most challenging.

“Before, as a player, all you need to do is play and prove your worth,” added Mr. Duremdes. “As commissioner, you’ll experience dealing with different types of people because every territory has different cultures.” — Rey Joble

Citizen tax planning

Any day from now, we expect the Bicameral Committee to submit the final version of the Tax Reform for Acceleration and Inclusion (TRAIN) package one to Malacañang for the approval and signature of President Duterte.

If everything goes according to plan of the Department of Finance (DoF), the tax reform law will be implemented in January 2018.

What does that mean to ordinary employees? How about for small businesses? And for the large taxpayers, will it mean less tax burden due to lowering of income tax? Or more aggressive tax audit and higher assessment to offset revenue losses from lowering of personal income tax?

The real big winners are our employees earning a monthly salary of P21,000 and below as they will be exempted from paying income tax. However, those earning above P8 million will be slapped with 35% personal income tax, higher than the current 30% corporate income tax.

It will be a merrier Christmas as well for our small businesses, as the TRAIN offers an optional flat 8% tax based on gross sales or receipts in lieu of business and income taxes.

Part of the tax package is an administrative reform to allow annual and quarterly filing and payment of income and business taxes in lieu of the monthly, even bi-monthly compliance under the current system.

The bigger bonus are the ease-in-tax payment provisions from slushing the 12-page income tax return (ITR) to 2-page ITR to simplified bookkeeping requirements among others.

This is exactly what the comprehensive tax reform package means — a simpler, fairer and more efficient tax system.

But it’s not all good news, as we all have to endure some sacrifices to make the system work. Here’s an overview of TRAIN package one as approved by the Bicameral Committee (see chart).

Citizen tax planning

Equally important to the proposed tax policy and administrative reforms is improving the voluntary compliance of taxpayers, especially the medium to large corporations, to avoid unnecessary penalties and compromises during the audit of the Bureau of Internal Revenue (BIR).

Admittedly, many of us are not even registered taxpayers.

While there are a few who registered themselves as individual or corporate taxpayers, only employees can be considered honest taxpayers as their income taxes are withheld at source.

In fact, 82% (P233 billion in 2014) of the total income tax collections from individual are withholding taxes on the compensation of our employees, while only five percent (P24 billion in 2014) is paid by self-employed and professionals.

So, if we want the comprehensive tax reform to work for us, for nation building, we all have to do our share.

For companies who are regularly audited by BIR, we have to stop bribing examiners and start paying the right taxes. Let’s heed to the call of BIR Commissioner Caesar Dulay to pay the right taxes correctly and on time, and not to the “pockets” of some corrupt BIR personnel.

Per RMC 60-2017, taxpayers are given the option to subscribe to the Seal of Honesty (SoH) Certification Program to help them improve their voluntary compliance as partners in nation building upon full satisfaction of the qualification criteria as a basis for entitlement of the benefits i.e., issuance of annual tax clearance, last priority audit and other privileges which DTI and other government agencies may extend to certified SoH taxpayer.

To start paying the right taxes or to improve our voluntary compliance and avoid unnecessary penalties and compromises from BIR audit, we need to undergo (citizen) tax planning and compliance review.

Similar to the annual strategic planning conducted by businesses, a taxpayer must also do tax planning to ensure full compliance on all tax rules and regulations, and at the same time, make a projection of the estimated tax liabilities to be included in the annual budget of the company.

Paying the right taxes is not necessarily paying more taxes.

In our social enterprise, we consider citizen tax planning as a game-changing strategy to help taxpayers pay the right taxes without the burden of unnecessary penalties and compromises. It’s an investment to help individuals and corporations save millions of taxes from unplanned tax compliance resulting to higher tax assessments with more than 200% penalties during BIR audit, while helping in nation building by paying the right taxes.

As we always say, if we want a better Philippines, we need to be good citizens and better taxpayers.

For inquiries about the Seal of Honesty (SoH) Certification Program, e-mail us at info@sealofhonesty.ph or call (+63) 622 7720.

The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the M.A.P.

 

Raymond A. Abrea, popularly known as the Philippine Tax Whiz, one of the 2015 The Outstanding Young Men of the Philippines (TOYM), an Asia CEO Young Leader of the Year, and founder of the Abrea Consulting Group and Center for Strategic Reforms of the Philippines (CSR Philippines). He currently serves as Adviser to the Commissioner of Internal Revenue on tax administration reform in promoting a culture of integrity and honesty in paying taxes.

consult@acg.ph

map@map.org.ph

http://map.org.ph

Suarez and Paulinho move Barca 11 clear of Real

MADRID — Barcelona opened up an 11-point La Liga lead over Real Madrid ahead of next weekend’s El Clasico between the Spanish giants as Luis Suarez and Paulinho each scored twice in a 4-0 thrashing of Deportivo la Coruna on Sunday.

Lionel Messi also saw a penalty saved and hit the woodwork three times as Barca regained their six-point lead over Atletico Madrid in second place.

Real remain down in fourth, but do have a game in hand on their rivals as they missed out on La Liga action this weekend to win the Club World Cup in Abu Dhabi on Saturday.

The only drawback for Barca as they extended their unbeaten run in all competitions to 24 games since they were beaten by Real on their last visit to the Santiago Bernabeu in the Spanish Super Cup back in August, was a muscle injury to Paco Alcacer that will keep the forward out for three weeks.

Messi paraded his fourth golden boot award for being the leading scorer in Europe last season before kick-off and could barely believe his luck as he failed to add to his 18 goals already this term.

However, the Argentine still had a huge role to play in three of Barca’s four goals.

Only a series of saves from Ruben Martinez to deny Messi and Aleix Vidal delayed Barca until the 29th minute from going in front when Messi presented Suarez with an early Christmas present to tap in from close range.

Messi then smashed against the bar, but the woodwork wasn’t so forgiving for Deportivo when Messi’s next attempt came off the post and into Paulinho’s path to make it 2-0 before half time.

Suarez’s return to form continued as he netted for a fourth time in his last three games by sweeping home Sergi Roberto’s cross at the end of a sweeping Barca counter-attack two minutes into the second half.

Messi hit the woodwork for a third time and then saw Martinez brilliantly save his effort from the spot after Suarez was upended inside the area.

But Martinez was helpless as Paulinho profited from a repeat of his first goal when he rolled into an empty net on the rebound after Jordi Alba also hit the frame of the goal.

Earlier, Villarreal bounced back from three straight defeats as Pablo Fornals grabbed the only goal in a 1-0 win at Celta Vigo.

Victory allowed Villarreal to leapfrog back above Girona into sixth after the Catalans had edged the battle of the high-flying newly promoted sides over Getafe 1-0 thanks to Cristhian Stuani’s early goal.

Managerless Las Palmas struck twice in the last 10 minutes to snatch a 2-2 draw with Espanyol, but remain rooted to the foot of the table. — AFP

Energy favoritism under TRAIN

The recently approved tax reform for acceleration and inclusion (TRAIN) by the Congressional Bicameral Committee exhibits a number of favoritism for some energy products and players while penalizing others. In particular, among the three fossil fuels, only petroleum products and coal received tax hike while natural gas was not mentioned and hence, not taxed.

In the VAT base expansion, expensive, unstable and intermittent renewable energy (RE) like wind-solar is again exempted (see table).

Energy favoritism under TRAIN

Here are the possible implications:

1. Since petroleum products are a public good, many goods and services will experience price hikes. Not only fares for jeepneys, buses, taxi, boats, and airplanes but also for agricultural products because most farmers now no longer use carabaos in tilling their farms, they use tractors, big and small; more farmers now also do not use human labor for harvesting rice, they use harvest + threshing combiner machines. Fishermen hardly use manual paddle boats, they use motorboats. Traders no longer use animals in transporting cargo, they use trucks.

2. Since coal power contributes 48% of total electricity production nationwide (2016 data) despite having only 34% of total installed power capacity, electricity prices will further go up, slowly but surely. Most apologists of raising coal taxes cite the “minimal impact” on households consuming 200 kWh/month. This may be true but those households work in factories, malls and hotels, schools and universities, hospitals and residential condos, airports and seaports. These establishments consume hundreds or thousands of MWh per month, not kWh of electricity. The additional cost will be passed on to the consumers.

3. Natural gas is also fossil fuel but it was never slapped with excise taxes. The Malampaya gas royalty is a tax on exploitation of a natural resource, the same way that the price of our imported petroleum and coal already include royalties. There is favoritism in exempting natural gas from excise tax. And there are some connections between some legislators and a known economist who pushed for high coal tax but silent on natural gas tax, with a big energy company whose main product is natural gas power generation.

4. Exempting RE from VAT but retaining VAT for fossil fuels. These REs are enjoying favoritism three times. First, this exemption from a high 12% VAT. Second, they are given guaranteed high prices for 20 years via feed-in-tariff (FiT). Third, they are given priority or mandatory dispatch to the grid even if they are expensive. For instance, FiT for solar1 is P10+/kWh, FiT for wind1 is P9+/kWh, average coal price is P4/kWh, can go down to P1.50/kWh on off-demand hours like midnight.

Soon, REs will be given a fourth privilege via the renewable portfolio standards (RPS), or minimum percentage of REs that electric cooperatives (ECs) and private distribution utilities (DUs) must purchase and distribute to households. REs then can price their electricity output high because these ECs and DUs have no choice, they will be penalized if they will not buy those expensive and intermittent REs.

Meanwhile, the DoF is often quoted as saying that “two million richest Filipino families consume 50% of oil products in the country.” This is one of the reasons why they pushed for high tax hike for oil products.

I have been intrigued by that repeated statement since last year and I am wondering what papers or studies justify this?

There are about 25 million Filipino families now. The DoF refers to the richest 2 million families, so the other 23 million middle class and poorer class Filipinos consume the other 50% of oil products.

The DoF is saying then that anytime in EDSA, NLEx, SLEx, roads in Visayas and Mindanao, etc. on average, about 50% of the cars, buses and trucks there transport the two million rich families and their goods? And that about half of domestic flights and the inter-island boat rides transport the richest two million families? This is absurd.

I think the DoF displayed dishonesty and deception in making that claim to further justify the high oil tax hikes. If such DoF claim has indeed objective basis, I am willing to apologize for this remark. For now, that statement is not backed up by solid numbers and hence, deceptive and opportunist.

 

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

minimalgovernment@gmail.com.

SSS to open 2 more branches in Davao

THE SOCIAL Security System (SSS) is opening two new branches in the Davao Region next year, one in Calinan, Davao City and the other in Nabunturan, Compostela Valley. Emmanuel A. Palma, SSS vice-president for Mindanao South 1 Division, told media in a briefing that there is already an identified site in Nabunturan, while the location in Calinan, where there is already a small service office, is still being scouted for. SSS President and Chief Executive Officer Emmanuel F. Dooc, meanwhile, said they are also studying the opening of more branches around Mindanao. “Sa lawak ng rehiyon kailangan pong dagdagan ’yan (The Mindanao region is so wide, we need to add more branches). By next year we will open up new branches here to be of greater service to our SSS members,” Mr. Dooc said. SSS currently has 279 branches nationwide serving about 36 million members. — Maya M. Padillo

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